Saturday, December 28, 2013
Monday, December 23, 2013
In wake of budget deal, U.S. Congress slices up trillion-dollar pie
In wake of budget deal, U.S. Congress slices up trillion-dollar pie
WASHINGTON
(Reuters) - As Washington empties out for the holidays, a final budget fight will play out in the nearly empty Capitol building as congressional staffers parcel out more than $1 trillion to fund everything from cybersecurity to student loans.
Unlike the knock-down budget battles that paralyzed government for much of the year, this debate will largely take place within what one lobbyist calls a "cone of silence" with Republicans and Democrats aiming to minimize discord as they race to set spending levels for thousands of individual government programs.
It's a chance for Congress to demonstrate that it is capable of doing its job after two years in which lawmakers let the government run on automatic pilot when they weren't shutting it down or imposing indiscriminate spending cuts.
It has also touched off a lobbying blitz as defence contractors, hospitals, day-care providers and thousands of other groups push to maximize funding for the programs that affect them most directly.
Business groups will push to fund job-training programs, while advocates for the elderly will fight for increased Alzheimer's disease research and teachers' unions will argue to restore money that has been cut from education.
There may be only so much they can do to influence the process as lawmakers retreat into their chambers to write the complex spending legislation.
"They absolutely know what our priorities are," said Beth Felder, a lobbyist for Johns Hopkins University, the largest academic recipient of U.S. research money. "At this point I don't think their phones need to be ringing off the hook."
For some, it's a chance to restore funding that fell victim to across-the-board "sequester" cuts that took effect in March. For others, it's a chance to launch new initiatives that have been sidelined for years as Democrats and Republicans have opted to renew old spending plans through temporary "continuing resolutions," rather than write new ones.
At Johns Hopkins, programs funded through the appropriations measures cover some hospital patients' medical bills and help students pay for their education. Researchers build satellites and develop missile-defense systems for the government and rely on federal money to fund medical research projects.
Federal spending is far and away the most important topic for lobbyists and their clients who hire them. Lobbying firms reported working on behalf of 3,076 clients this year for budget and spending issues, nearly twice as much as any other issue, according to the Center for Responsive Politics.
Collectively, those lobbyists can claim a partial victory. The budget deal that passed the House of Representatives and the Senate this week gives lawmakers authority to spend $45 billion more than would have otherwise been available.
RISING TIDE FOR INTEREST GROUPS
Now those interest groups will be essentially competing with each other for a slice of the same pie.
"We cooperate because a rising tide lifts all boats," said Emily Holubowich, who heads a coalition of 3,200 organizations that have pressed for more domestic funding. "Then we're competing with one another for those limited resources."
The deal provides a ceasefire in the budget wars that have consumed Washington since Republicans won control of the House in 2010 on a promise to cut spending.
It gives lawmakers on the appropriations committees $1.012 trillion to spend, splitting the difference between the House and the Democratic-controlled Senate.
It's not clear how that money will be divided.
Lobbyists say they expect it will be split evenly between military and domestic programs, with the money being distributed proportionately between the 12 subcommittees that each oversee a portion of the government.
But they're not likely to learn much more than that over the coming weeks as lawmakers will try to keep their work as private as possible, said Jim Dyer, a longtime Republican appropriations staffer who now works as a lobbyist.
"If a decision gets out, there'll be five people to preserve it and 10 people to overthrow it. You have to be very careful about the information that goes out in the public domain at this time," he said.
Congress hasn't written proper spending laws for most domestic programs since December 2011, opting instead to fund wide swaths of the government under continuing resolutions that freeze operations in place.
A CHANCE FOR NEW INITIATIVES
As a result, new initiatives have been put on hold.
Among them, for example, is a plan that would use advanced molecular-identification techniques to identify and isolate outbreaks of food poisoning, influenza or other public health threats more quickly.
Obama requested $40 million for the program this spring, and the Senate approved spending for half that amount in the summer.
Lobbyist Peter Kyriacopoulos brought in state and local public health workers to pitch the program to lawmakers in March, and he's following up with phone calls to staffers now. But he says it may be tough to convince Republicans to sign off on new spending.
"The House has been operating in a very unique way, so we go in and say what we can and we hope for the best," he said. "But no one's told me to go away," he said.
Others are more optimistic. Armed with figures that show how many patients in each congressional district have been unable to get treatment due to the sequester cuts, David Pugach of the American Cancer Society has been pressing appropriators to restore medical research funding at the National Institutes of Health to its pre-sequester level.
"When appropriators are making decisions based on what they say is most important, funding for cancer research and prevention should be at the top of that list and in all likelihood would do rather well," he said.
As the sequester forced sharp cutbacks in the Head Start early childhood education program, backers across the country ensured the cuts were covered in local media and pressured lawmakers to restore funding. Hopefully, that will have generated enough momentum to restore the $400 million that has been cut, said Yasmina Vinci of the National Head Start Association.
"Our first, biggest, most glaring priority is restoring the cuts that happened," she said. "I'm hoping we have done our work."
(Editing by Fred Barbash and Eric Walsh)
(Reuters) - As Washington empties out for the holidays, a final budget fight will play out in the nearly empty Capitol building as congressional staffers parcel out more than $1 trillion to fund everything from cybersecurity to student loans.
Unlike the knock-down budget battles that paralyzed government for much of the year, this debate will largely take place within what one lobbyist calls a "cone of silence" with Republicans and Democrats aiming to minimize discord as they race to set spending levels for thousands of individual government programs.
It's a chance for Congress to demonstrate that it is capable of doing its job after two years in which lawmakers let the government run on automatic pilot when they weren't shutting it down or imposing indiscriminate spending cuts.
It has also touched off a lobbying blitz as defence contractors, hospitals, day-care providers and thousands of other groups push to maximize funding for the programs that affect them most directly.
Business groups will push to fund job-training programs, while advocates for the elderly will fight for increased Alzheimer's disease research and teachers' unions will argue to restore money that has been cut from education.
There may be only so much they can do to influence the process as lawmakers retreat into their chambers to write the complex spending legislation.
"They absolutely know what our priorities are," said Beth Felder, a lobbyist for Johns Hopkins University, the largest academic recipient of U.S. research money. "At this point I don't think their phones need to be ringing off the hook."
For some, it's a chance to restore funding that fell victim to across-the-board "sequester" cuts that took effect in March. For others, it's a chance to launch new initiatives that have been sidelined for years as Democrats and Republicans have opted to renew old spending plans through temporary "continuing resolutions," rather than write new ones.
At Johns Hopkins, programs funded through the appropriations measures cover some hospital patients' medical bills and help students pay for their education. Researchers build satellites and develop missile-defense systems for the government and rely on federal money to fund medical research projects.
Federal spending is far and away the most important topic for lobbyists and their clients who hire them. Lobbying firms reported working on behalf of 3,076 clients this year for budget and spending issues, nearly twice as much as any other issue, according to the Center for Responsive Politics.
Collectively, those lobbyists can claim a partial victory. The budget deal that passed the House of Representatives and the Senate this week gives lawmakers authority to spend $45 billion more than would have otherwise been available.
RISING TIDE FOR INTEREST GROUPS
Now those interest groups will be essentially competing with each other for a slice of the same pie.
"We cooperate because a rising tide lifts all boats," said Emily Holubowich, who heads a coalition of 3,200 organizations that have pressed for more domestic funding. "Then we're competing with one another for those limited resources."
The deal provides a ceasefire in the budget wars that have consumed Washington since Republicans won control of the House in 2010 on a promise to cut spending.
It gives lawmakers on the appropriations committees $1.012 trillion to spend, splitting the difference between the House and the Democratic-controlled Senate.
It's not clear how that money will be divided.
Lobbyists say they expect it will be split evenly between military and domestic programs, with the money being distributed proportionately between the 12 subcommittees that each oversee a portion of the government.
But they're not likely to learn much more than that over the coming weeks as lawmakers will try to keep their work as private as possible, said Jim Dyer, a longtime Republican appropriations staffer who now works as a lobbyist.
"If a decision gets out, there'll be five people to preserve it and 10 people to overthrow it. You have to be very careful about the information that goes out in the public domain at this time," he said.
Congress hasn't written proper spending laws for most domestic programs since December 2011, opting instead to fund wide swaths of the government under continuing resolutions that freeze operations in place.
A CHANCE FOR NEW INITIATIVES
As a result, new initiatives have been put on hold.
Among them, for example, is a plan that would use advanced molecular-identification techniques to identify and isolate outbreaks of food poisoning, influenza or other public health threats more quickly.
Obama requested $40 million for the program this spring, and the Senate approved spending for half that amount in the summer.
Lobbyist Peter Kyriacopoulos brought in state and local public health workers to pitch the program to lawmakers in March, and he's following up with phone calls to staffers now. But he says it may be tough to convince Republicans to sign off on new spending.
"The House has been operating in a very unique way, so we go in and say what we can and we hope for the best," he said. "But no one's told me to go away," he said.
Others are more optimistic. Armed with figures that show how many patients in each congressional district have been unable to get treatment due to the sequester cuts, David Pugach of the American Cancer Society has been pressing appropriators to restore medical research funding at the National Institutes of Health to its pre-sequester level.
"When appropriators are making decisions based on what they say is most important, funding for cancer research and prevention should be at the top of that list and in all likelihood would do rather well," he said.
As the sequester forced sharp cutbacks in the Head Start early childhood education program, backers across the country ensured the cuts were covered in local media and pressured lawmakers to restore funding. Hopefully, that will have generated enough momentum to restore the $400 million that has been cut, said Yasmina Vinci of the National Head Start Association.
"Our first, biggest, most glaring priority is restoring the cuts that happened," she said. "I'm hoping we have done our work."
(Editing by Fred Barbash and Eric Walsh)
DAILY TIPS, POSITIONAL TIPS, BTST TIPS IN NIFTY OPTIONS, BANK NIFTY OPTIONS
| DECEMBER NIFTY OPTIONS - RAJKAMALSTOCKOPTIONS | |||||
| NIFTY OPTION | DATE | ENTRY | SL | CLOSE CALL | P / L - 5 LOTS |
| NIFTY 6200 CALL | 29/11/2013 | 105 | 140 | 8750.00 | |
| NIFTY 6100 PUT | 3/12/2013 | 88 | BTST | 104 | 4000.00 |
| BANKNIFTY 11000 PUT | 3/12/2013 | 250 | BTST | 300 | 6250.00 |
| NIFTY 6250 CALL | 5/12/2013 | 140 | BTST | 180 | 10000.00 |
| BANKNIFTY 12000 CALL | 9/12/2013 | 250 | BTST | 420 | 21250.00 |
| NIFTY 6300 CALL | 23/12/2013 | 32 | BTST | 50 | 4500.00 |
| NIFTY 6400 CALL | 17/12/2013 | 10 | BTST | ||
| BANKNIFTY 11200 CALL | 18/12/2013 | 280 | INTRADAY | 480 | 25000.00 |
| NIFTY 6300 PUT | 19/12/2013 | 125 | INTRADAY | 145 | 5000.00 |
| 84750.00 | |||||
Stock options performance : daily tips, positional tips, btst tips
| DECEMBER STOCKOPTIONS - RAJKAMALSTOCKOPTIONS | ||||||
| STOCK | DATE | STRIKE | ENTRY | SL | CLOSED CALL | P/L-2LOTS |
| BANKINDIA | 1/12/13 | 220 CALL | 11 | BTST | 14 | 6000.00 |
| BAJAJ AUTO | 3/12/13 | 1900 PUT | 26 | BTST | 34 | 2000.00 |
| WIPRO | 3/12/13 | 480 CALL | 16 | BTST | 19 | 3000.00 |
| MARUTI | 5/12/13 | 1700 CALL | 44 | BTST | 52 | 4000.00 |
| COALINDIA | 6/12/13 | 280 CALL | 9 | BTST | 13 | 8000.00 |
| UCOBANK | 6/12/13 | 80 CALL | 2.5 | INTRADAY | 3.5 | 8000.00 |
| UNIONBANK | 6/12/13 | 125 CALL | 6 | INTRADAY | 9 | 6000.00 |
| SSLT | 9/12/13 | 200 CALL | 3 | INTRADAY | 4 | 4000.00 |
| HEXAWARE | 10/12/13 | 120 CALL | 3 | BTST | 5 | 8000.00 |
| SSLT | 10/12/13 | 200 CALL | 4.5 | INTRADAY | 5.5 | 4000.00 |
| SSLT | 16/12/13 | 200 CALL | 3 | INTRADAY | 4.5 | 6000.00 |
| JINDALSTEL | 23/12/13 | 260 CALL | 5 | Positional | 8 | 6000.00 |
| ADANI ENT | 23/12/13 | 270 CALL | 5 | Positional | 7 | 4000.00 |
| 69000.00 | ||||||
Thursday, December 19, 2013
Fed cuts bond buying in first step away from historic stimulus
Fed cuts bond buying in first step away from historic stimulus
WASHINGTON
(Reuters) - The Federal Reserve on Wednesday embarked on the risky task of winding down the era of easy money, saying the U.S. economy was finally strong enough for it to start scaling down its massive bond-buying stimulus.
The central bank modestly trimmed the pace of its monthly asset purchases, by $10 billion to $75 billion, and sought to temper the long-awaited move by suggesting its key interest rate would stay at rock bottom even longer than previously promised.
At his last scheduled news conference as Fed chairman, Ben Bernanke said the purchases would likely be cut at a "measured" pace through much of next year if job gains continued as expected, with the program fully shuttered by late-2014.
The move, which surprised some investors but did not cause the market shock many had feared, was a nod to better prospects for the economy and labor market. It marked a historic turning point for the largest monetary policy experiment ever.
"The recovery clearly remains far from complete," Bernanke said. But "we're hopeful ... we'll begin to see the whites of the eyes of the end of the recovery, and the beginning of the more normal period of economic growth."
Bernanke said he consulted closely on the decision with Fed Vice Chair Janet Yellen, who is set to succeed him once he steps down on January 31 after eight years at the helm. "She fully supports what we did today," he said.
Investors took the action as a validation that the outlook for the economy was improving. After a brief pullback, U.S. stocks rallied sharply, with both S&P 500 and Dow industrials closing at all-time highs.
At the same time, U.S. Treasury bond prices fell, but the move was modest, capped by the Fed's strengthened commitment to keep interest rates near zero for a long time irrespective of the reduction in its asset purchases.
The Fed said monthly purchases of both mortgage and Treasury bonds would be trimmed by $5 billion each, starting in January.
"This is a modest change, not a big one, and it shows that they are not in a rush," said Scott Clemons, chief investment strategist for Brown Brothers Harriman Wealth Management. "The Fed is using very careful language that they are going to continue to support the economy."
END OF AN ERA
The Fed's extraordinary money-printing has helped drive stocks to record highs and sparked sharp gyrations in foreign currencies, including a drop in emerging markets earlier this year as investors anticipated an end to the easing.
"They finally pulled a Band-Aid off that they've been tugging at for a long time," said Rick Meckler, president of hedge fund LibertyView Capital Management in Jersey City, New Jersey.
The Fed launched its third and latest round of quantitative easing, or QE, 15 months ago to kick-start hiring and growth in an economy recovering only slowly from the recession. Its first program was launched during the 2008 financial crisis.
The central bank's asset purchase programs, a centerpiece of its crisis-era policy, have left it holding roughly $4 trillion of bonds, and the path it must follow in dialing it down is rife with numerous risks, including the possibility of higher-than-targeted interest rates and a loss of investor confidence.
To soothe investors' nerves, the Fed said it "likely will be appropriate" to keep overnight rates near zero "well past the time" that the jobless rate falls below 6.5 percent, especially if inflation expectations remain below target.
The Fed has held rates near zero since late 2008.
It was a noteworthy tweak to an earlier pledge to keep benchmark credit costs steady at least until the jobless rate, which dropped to a five-year low of 7.0 percent in November, hits 6.5 percent.
"The actions today are intended to keep the level of accommodation the same overall," said Bernanke, who held out the prospect of fresh stimulus if the economy stumbled. He said officials could further bolster their low-rate pledge, or even cut the interest rate they pay banks on excess reserves held at the Fed in a bid to spur lending.
EXPECTATIONS ON INFLATION, RATES
In fresh quarterly forecasts, the central bank lowered its expectations for both inflation and unemployment over the next few years, acknowledging the jobless rate had fallen more quickly than expected. It now sees it reaching a range of 6.3 percent to 6.6 percent by the end of 2014, from a previous prediction of 6.4 percent to 6.8 percent.
Three policymakers expect the first rate rise to come in 2016, up from only two in September, while 12 of the Fed's 17 top officials still see the move in 2015. Futures markets do not see better-than-even odds of a rate hike until September 2015.
Critics of the bond buying, including some Fed officials, have worried the program could unleash inflation or fuel hard-to-detect asset price bubbles.
But some have credited the purchases with stabilizing an economy and banking system that had been crippled by the 2008 financial crisis and with staving off what could have been a damaging cycle of deflation.
One policymaker, Eric Rosengren of the Boston Fed, dissented against the decision, which he felt was premature given the still-high unemployment rate.
Bernanke stressed the Fed was not giving up on supporting the economy, and said it would take action if inflation failed to rise to the central bank's 2 percent target. Inflation as measured by the Fed's preferred price gauge rose just 0.7 percent in the 12 months through October.
Even so, recent growth in jobs, retail sales and housing, as well as a fresh budget deal in Congress, had convinced a growing number of economists the Fed would trim the bond purchases.
But many thought the central bank would wait until early in the new year, given persistently low inflation and the fact that the world's largest economy has stumbled several times in its crawl out of the 2007-2009 recession.
(Reporting by Jonathan Spicer and Jason Lange; Editing by Krista Hughes, Tim Ahmann and Dan Grebler)
(Reuters) - The Federal Reserve on Wednesday embarked on the risky task of winding down the era of easy money, saying the U.S. economy was finally strong enough for it to start scaling down its massive bond-buying stimulus.
The central bank modestly trimmed the pace of its monthly asset purchases, by $10 billion to $75 billion, and sought to temper the long-awaited move by suggesting its key interest rate would stay at rock bottom even longer than previously promised.
At his last scheduled news conference as Fed chairman, Ben Bernanke said the purchases would likely be cut at a "measured" pace through much of next year if job gains continued as expected, with the program fully shuttered by late-2014.
The move, which surprised some investors but did not cause the market shock many had feared, was a nod to better prospects for the economy and labor market. It marked a historic turning point for the largest monetary policy experiment ever.
"The recovery clearly remains far from complete," Bernanke said. But "we're hopeful ... we'll begin to see the whites of the eyes of the end of the recovery, and the beginning of the more normal period of economic growth."
Bernanke said he consulted closely on the decision with Fed Vice Chair Janet Yellen, who is set to succeed him once he steps down on January 31 after eight years at the helm. "She fully supports what we did today," he said.
Investors took the action as a validation that the outlook for the economy was improving. After a brief pullback, U.S. stocks rallied sharply, with both S&P 500 and Dow industrials closing at all-time highs.
At the same time, U.S. Treasury bond prices fell, but the move was modest, capped by the Fed's strengthened commitment to keep interest rates near zero for a long time irrespective of the reduction in its asset purchases.
The Fed said monthly purchases of both mortgage and Treasury bonds would be trimmed by $5 billion each, starting in January.
"This is a modest change, not a big one, and it shows that they are not in a rush," said Scott Clemons, chief investment strategist for Brown Brothers Harriman Wealth Management. "The Fed is using very careful language that they are going to continue to support the economy."
END OF AN ERA
The Fed's extraordinary money-printing has helped drive stocks to record highs and sparked sharp gyrations in foreign currencies, including a drop in emerging markets earlier this year as investors anticipated an end to the easing.
"They finally pulled a Band-Aid off that they've been tugging at for a long time," said Rick Meckler, president of hedge fund LibertyView Capital Management in Jersey City, New Jersey.
The Fed launched its third and latest round of quantitative easing, or QE, 15 months ago to kick-start hiring and growth in an economy recovering only slowly from the recession. Its first program was launched during the 2008 financial crisis.
The central bank's asset purchase programs, a centerpiece of its crisis-era policy, have left it holding roughly $4 trillion of bonds, and the path it must follow in dialing it down is rife with numerous risks, including the possibility of higher-than-targeted interest rates and a loss of investor confidence.
To soothe investors' nerves, the Fed said it "likely will be appropriate" to keep overnight rates near zero "well past the time" that the jobless rate falls below 6.5 percent, especially if inflation expectations remain below target.
The Fed has held rates near zero since late 2008.
It was a noteworthy tweak to an earlier pledge to keep benchmark credit costs steady at least until the jobless rate, which dropped to a five-year low of 7.0 percent in November, hits 6.5 percent.
"The actions today are intended to keep the level of accommodation the same overall," said Bernanke, who held out the prospect of fresh stimulus if the economy stumbled. He said officials could further bolster their low-rate pledge, or even cut the interest rate they pay banks on excess reserves held at the Fed in a bid to spur lending.
EXPECTATIONS ON INFLATION, RATES
In fresh quarterly forecasts, the central bank lowered its expectations for both inflation and unemployment over the next few years, acknowledging the jobless rate had fallen more quickly than expected. It now sees it reaching a range of 6.3 percent to 6.6 percent by the end of 2014, from a previous prediction of 6.4 percent to 6.8 percent.
Three policymakers expect the first rate rise to come in 2016, up from only two in September, while 12 of the Fed's 17 top officials still see the move in 2015. Futures markets do not see better-than-even odds of a rate hike until September 2015.
Critics of the bond buying, including some Fed officials, have worried the program could unleash inflation or fuel hard-to-detect asset price bubbles.
But some have credited the purchases with stabilizing an economy and banking system that had been crippled by the 2008 financial crisis and with staving off what could have been a damaging cycle of deflation.
One policymaker, Eric Rosengren of the Boston Fed, dissented against the decision, which he felt was premature given the still-high unemployment rate.
Bernanke stressed the Fed was not giving up on supporting the economy, and said it would take action if inflation failed to rise to the central bank's 2 percent target. Inflation as measured by the Fed's preferred price gauge rose just 0.7 percent in the 12 months through October.
Even so, recent growth in jobs, retail sales and housing, as well as a fresh budget deal in Congress, had convinced a growing number of economists the Fed would trim the bond purchases.
But many thought the central bank would wait until early in the new year, given persistently low inflation and the fact that the world's largest economy has stumbled several times in its crawl out of the 2007-2009 recession.
(Reporting by Jonathan Spicer and Jason Lange; Editing by Krista Hughes, Tim Ahmann and Dan Grebler)
OPTION TIPS : INTRADAY - POSITIONAL TIPS - DAILY PERFORMANCE REPORT
| DECEMBER NIFTY OPTIONS - RAJKAMALSTOCKOPTIONS | |||||
| NIFTY OPTION | DATE | ENTRY | SL | CLOSE CALL | P / L - 5 LOTS |
| NIFTY 6200 CALL | 29/11/2013 | 105 | 140 | 8750.00 | |
| NIFTY 6100 PUT | 3/12/2013 | 88 | BTST | 104 | 4000.00 |
| BANKNIFTY 11000 PUT | 3/12/2013 | 250 | BTST | 300 | 6250.00 |
| NIFTY 6250 CALL | 5/12/2013 | 140 | BTST | 180 | 10000.00 |
| BANKNIFTY 12000 CALL | 9/12/2013 | 250 | BTST | 420 | 21250.00 |
| NIFTY 6300 CALL | 17/12/2013 | 32 | BTST | ||
| NIFTY 6400 CALL | 17/12/2013 | 10 | BTST | ||
| BANKNIFTY 11200 CALL | 18/12/2013 | 280 | INTRADAY | 480 | 25000.00 |
| NIFTY 6300 PUT | 19/12/2013 | 125 | INTRADAY | 145 | 5000.00 |
| 80250.00 | |||||
Wednesday, December 18, 2013
Trading is a Business : Simple and intelligent Rules for Trading
Trading is a Business :
Simple and intelligent Rules for Trading
Simple and intelligent Rules for Trading
Fed faces tough call on bond buying as economy strengthens
Fed faces tough call on bond buying as economy strengthens
WASHINGTON
(Reuters) - The Federal Reserve will decide on Wednesday whether the U.S. economy is finally resilient enough to withstand less policy support, or whether it is prudent to wait a bit longer.
With the world's financial markets on edge, the U.S. central bank wraps up a two-day meeting with a highly anticipated policy announcement at 2 p.m. (1900 GMT), followed by Ben Bernanke's last news conference as Fed chairman a half hour later.
Recent growth in jobs and retail sales, as well as a fresh budget deal in Congress, has convinced a growing number of economists the time is right for the Fed to trim its $85 billion in monthly bond purchases. The 15-month-old program is meant to put downward pressure on long-term borrowing costs in order to stimulate investment and hiring.
But many observers believe the central bank will wait until early in the new year, given persistently low inflation and the fact that the world's largest economy has stumbled several times in its crawl out of the 2007-2009 recession.
"It is increasingly looking like a coin flip," said Michael Feroli, JPMorgan's chief U.S. economist.
If it waits, the Fed might still decide to better telegraph how it plans to wind down the stimulus program, as a handful of its 18 policymakers have suggested in recent weeks.
The Fed has kept interest rates near zero since 2008 and plans to leave them there for a while longer irrespective of when it begins to taper the bond buying. The purchases have swelled its balance sheet to a record $3.9 trillion.
The unprecedented money-printing has helped drive U.S. stocks to record highs and sparked sharp gyrations in foreign currencies, including a drop in emerging markets this year as investors anticipated an end to the easing. There has also been some anxiety in the United States that it could fuel inflation and hard-to-detect asset price bubbles.
Fed officials will also update their economic forecasts on Wednesday, likely acknowledging the faster-than-expected drop in joblessness to a five-year low of 7 percent last month. Perhaps most critically for investors, they could also tinker with their longer-term policy promises.
MESSAGE TO MARKETS
As it stands, officials have said the Fed will continue buying bonds until there is a substantial and sustainable pick-up in the labor market. They also want to see inflation rise somewhat from its current level of near 1 percent.
Bernanke will likely double down on his message that interest rates will stay near zero at least until unemployment falls to 6.5 percent, as long as inflation does not threaten to top 2.5 percent.
The Fed could even lower that 6.5 percent jobless rate threshold, or add a third marker that promises low rates if inflation remains below 1.5 percent -- moves that would be more likely if it decides to reduce its bond buying.
The fear is that a cut to the Treasury and mortgage-bond purchases - even if only by around $10 billion per month - will lead to a market selloff that will hike mortgage rates and other borrowing costs, choking the economy's recovery. Many borrowing costs, including for mortgages, are pegged to the yield on the 10-year Treasury note, which moves inversely to its price.
Accompanying any reduction with steps that offer reassurance that the Fed is not withdrawing its monetary support for the economy could help temper the market reaction.
"It's clear they'd like to see these asset purchases scaled back," said Jerry Webman, chief economist at OppenheimerFunds in New York. "It's also clear they're going to ... do what's necessary with monetary policy to support the economy."
According to a Reuters poll taken before lawmakers struck a budget deal last week, only 12 of 60 economists expected the Fed to scale back its purchases this week. Twenty-two predicted it would wait until January, while about half pointed to March.
With inflation so low, "a tightening move would be quite unusual by historical standards," Goldman Sachs economist David Mericle wrote in a client note. He expects the Fed to hold off until March.
Fed officials "will be reluctant to deliver a hawkish surprise that could tighten financial conditions and raise doubts about their commitment to the inflation target" of 2 percent, he added. The government said on Tuesday that consumer prices rose just 1.2 percent over the last 12 months
.
The Fed policy meeting will be the penultimate one of Bernanke's tenure. His second four-year term as chairman of the central bank expires on January 31, just two days after the close of the Fed's first policy meeting of 2014.
Janet Yellen, the Fed's vice chair and a strong proponent of the Fed's aggressive policy response to the recession, is positioned to succeed Bernanke. The U.S. Senate is expected to vote to confirm her for the post on Thursday.
(Reporting by Jonathan Spicer; Editing by Leslie Adler)
With the world's financial markets on edge, the U.S. central bank wraps up a two-day meeting with a highly anticipated policy announcement at 2 p.m. (1900 GMT), followed by Ben Bernanke's last news conference as Fed chairman a half hour later.
Recent growth in jobs and retail sales, as well as a fresh budget deal in Congress, has convinced a growing number of economists the time is right for the Fed to trim its $85 billion in monthly bond purchases. The 15-month-old program is meant to put downward pressure on long-term borrowing costs in order to stimulate investment and hiring.
But many observers believe the central bank will wait until early in the new year, given persistently low inflation and the fact that the world's largest economy has stumbled several times in its crawl out of the 2007-2009 recession.
"It is increasingly looking like a coin flip," said Michael Feroli, JPMorgan's chief U.S. economist.
If it waits, the Fed might still decide to better telegraph how it plans to wind down the stimulus program, as a handful of its 18 policymakers have suggested in recent weeks.
The Fed has kept interest rates near zero since 2008 and plans to leave them there for a while longer irrespective of when it begins to taper the bond buying. The purchases have swelled its balance sheet to a record $3.9 trillion.
The unprecedented money-printing has helped drive U.S. stocks to record highs and sparked sharp gyrations in foreign currencies, including a drop in emerging markets this year as investors anticipated an end to the easing. There has also been some anxiety in the United States that it could fuel inflation and hard-to-detect asset price bubbles.
Fed officials will also update their economic forecasts on Wednesday, likely acknowledging the faster-than-expected drop in joblessness to a five-year low of 7 percent last month. Perhaps most critically for investors, they could also tinker with their longer-term policy promises.
MESSAGE TO MARKETS
As it stands, officials have said the Fed will continue buying bonds until there is a substantial and sustainable pick-up in the labor market. They also want to see inflation rise somewhat from its current level of near 1 percent.
Bernanke will likely double down on his message that interest rates will stay near zero at least until unemployment falls to 6.5 percent, as long as inflation does not threaten to top 2.5 percent.
The Fed could even lower that 6.5 percent jobless rate threshold, or add a third marker that promises low rates if inflation remains below 1.5 percent -- moves that would be more likely if it decides to reduce its bond buying.
The fear is that a cut to the Treasury and mortgage-bond purchases - even if only by around $10 billion per month - will lead to a market selloff that will hike mortgage rates and other borrowing costs, choking the economy's recovery. Many borrowing costs, including for mortgages, are pegged to the yield on the 10-year Treasury note, which moves inversely to its price.
Accompanying any reduction with steps that offer reassurance that the Fed is not withdrawing its monetary support for the economy could help temper the market reaction.
"It's clear they'd like to see these asset purchases scaled back," said Jerry Webman, chief economist at OppenheimerFunds in New York. "It's also clear they're going to ... do what's necessary with monetary policy to support the economy."
According to a Reuters poll taken before lawmakers struck a budget deal last week, only 12 of 60 economists expected the Fed to scale back its purchases this week. Twenty-two predicted it would wait until January, while about half pointed to March.
With inflation so low, "a tightening move would be quite unusual by historical standards," Goldman Sachs economist David Mericle wrote in a client note. He expects the Fed to hold off until March.
Fed officials "will be reluctant to deliver a hawkish surprise that could tighten financial conditions and raise doubts about their commitment to the inflation target" of 2 percent, he added. The government said on Tuesday that consumer prices rose just 1.2 percent over the last 12 months
.
The Fed policy meeting will be the penultimate one of Bernanke's tenure. His second four-year term as chairman of the central bank expires on January 31, just two days after the close of the Fed's first policy meeting of 2014.
Janet Yellen, the Fed's vice chair and a strong proponent of the Fed's aggressive policy response to the recession, is positioned to succeed Bernanke. The U.S. Senate is expected to vote to confirm her for the post on Thursday.
(Reporting by Jonathan Spicer; Editing by Leslie Adler)
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